Australia's global marketplaces

Jason Aravanis

Senior Industry Analyst, IBISWorld

As trade and the provision of services become increasingly globalised, many Australian companies have looked to international markets to generate revenue and protect their operations, expanding operations particularly to Asia.

In the region, China is not alone in growing a much broader consumer market. There is a rising middle class in emerging markets like Vietnam, Thailand and Indonesia.

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A range of companies in different industries have benefited from increased demand from Asian markets including mining, food and beverage producers and education institutions. It is then little surprise that many of these companies are included in IBISWorld’s 2017 list of Australia’s Top 1000 companies.

" Australia’s reputation for high-quality food and beverage has given domestic companies an advantage in Asian markets.”-Jason Aravanis

For example, revenue generated by domestic exporters in China totalled over $A90 billion in 2016-17 and local companies have also experienced strong demand growth from other Asian markets.

The Australian Government has also realised the potential of Asian markets with the signing of a number of trade deals in recent years.

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Mining

Top 1000 mining companies, such as Rio Tinto, BHPand FortescueMetals Group, have very strong links to Asian economies.

In 2017, almost 56 per cent of Rio Tinto’s revenue was generated through sales to China and Japan, and an additional 12 per cent was generated through sales to other Asian economies.

Of the one billion tonnes of iron ore imported to China in 2017, over 65 per cent was produced by Australian firms however the relationship between China and Australian mining companies has changed over the past two years.

Since 2016, China has curtailed domestic production of commodities including coal, steel, and aluminium during winter in order to improve environmental conditions. This has had mixed effects on major Australian mining companies.

High-grade iron ore producers have seen the benefits as Chinese steel mills have increased demand for high grade iron ore which enables cleaner production. Both Rio Tinto and BHP produce high grade iron ore from the Pilbara region.

In contrast, Fortescue produces lower grade ore, and has had to offer increasingly large price discounts in order to maintain demand from Chinese clients.

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Food and beverage

Australia’s reputation for producing high-quality food and beverage products has given many domestic companies an advantage in Asian markets with growing middle classes and rising demand for premium products.

Exports now account for a significant proportion of revenue in many food and beverage manufacturing industries including the $A890 million milk powder industry which made 90 per cent of their profits from exports in 2017-18.

Although growing strongly, Bega, like many other milk powder exporters, has faced challenges relating to the change in China’s infant formula regulation in January 2018.

GrainCorp and meat processors like Teys Australia have benefited from the relaxation of China’s red meat importation regulations that increased the number of abattoirs that can export to China.

Other food products that are being increasingly demanded by Asian consumers include wine, and fish and seafood products. Non-frozen crustacean exports to Vietnam increased from around $A15,000 to over $A500 million in from 2009 to 2017, with rock lobster particularly in demand with Vietnamese consumers.

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Education

Higher education institutions have also benefited from increased demand from Asian markets over the past five years and Asian student enrolment numbers have increased strongly.

The depreciation of the Australian dollar encouraged more students to choose Australia over other education markets and the Streamlining of student visa processing and applications have helped to boost enrolment numbers.

The number of students from China enrolled in Australian higher education institutions increased from just over 55,000 students to over 130,000 in the last 10 years.

Jason Aravanis is a Senior Industry Analyst at IBISWorld

The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.